7) Licensing - U.S./Germany, 1998 - 2006: lack of follow-up

Compelling Event

After being granted a U.S. patent in Sept. 1998, the U.S. team celebrated this victory. The team took pride in having won a broad methods patent without having used patent attorneys. The next step was licensing. Letters describing the patent were sent to the Big Three U.S. auto manufacturers. I had thought that was premature, a shot in the dark. We would not, of course, be answered.

To my amazement, Tim Schafer, Assistant Director of General Motors New Devices Section, informed us our proposal was being submitted for formal review. Ford wanted to see production samples. Chrysler wanted to see a working prototype. (Our primary market was motor vehicles in the U.S., of which there are over 200 million.) The show of interest from the Big Three led to two events.

The first was to seek $3,000,000 in venture capital over three phases. Contact was made and interviews held with business angels and a variety of venture capital firms. The strongest interest was shown by a venture capitalist in Jacksonville, Florida. Curiously, the firm did not want to pursue the device for the automotive markets, but rather for a variation of it aimed at supermarkets.

The second response was that two of the initial founding members of the team, a young married couple, went on a spending spree. They were convinced they would soon be earning a fortune.

They moved out of their nice apartment in South Carolina to relocate in Florida. There they took out a large mortgage to purchase their dream house. A year later, swamped in credit card debt, they took a second mortgage on the house to “consolidate the debt.” Six months after that, they filled bankruptcy. I purchased their share of the patent rights to become the sole owner.

However their personal financial problems had led to the venture capital and financing effort stalling out. Time had moved on and I felt a fresh start in a new market would be a better way to go. Therefore I took the U.S. patent to Germany and re-wrote it (again without a patent attorney) to obtain a German patent.

This “sister” patent was, in fact, awarded, after extensive negotiations with the German patent office, Dec. 2000. (The initial reaction of the senior reviewer in Munich was that the reviewer in the U.S. must have been “drunk, or on recreational drugs” to have granted it.)

1st follow-up failure

My goals had been to “seize control of the patent in U.S. and to get one Germany.” Upon reaching these goals, my follow-up, to move from patent to a real business with customers and revenues, was poor (“herzlich wenig”).

The next three years, 2001, 2002 and 2003 perhaps eight or ten meetings were held all told – with no results. By 2003 the patent and its story were relegated to an interesting case study to present in marketing classes and seminars I held.

In 2003 a student, who had a military background and was very much a dynamic, “make it happen” individual, became excited about the possibilities – also in military markets. As a first step, he wanted to enter the Munich Business Plan Competition with me. Naturally I agreed. He not only worked hard on the actual submission, but spent a great deal of time networking, so that he learned exactly what the judges were looking for. To my pleasant surprise, and largely due to his efforts, our submission won Stage I of the Munich Business Plan Competition, March 2004.

The prize included free office space in a Siemens building for a year, which we did not really need. More important was the “seal of approval,” the stamp of legitimacy that winning the competition lent us. That said, it still took a full two years, until March 2006, before a licensing contract was signed. That was done with FAIST System GmbH, an OEM for the automotive industry in Germany.

2nd follow-up failure

Our goal was to get a signed licensing contract. That goal accomplished, our – and especially my – follow-up was poor. I did not stay on top of the project, monitor its progress, seek to make a marketing contribution. Prototypes were made in East Europe. There were plans to produce in China. At FAIST other priorities took precedence. The project fell by the wayside.

Aftermath

The last letter I received expressing interest in the patent (from another source) was 2009, but I did not pursue it. Filed away “in a shoebox” is a rough draft for another patent. It is for a designer attaché case, as ones I looked at from Cartier, Louis Vuitton, Eduard Meier etc. all struck me as surprisingly wanting. Premium pricing was being asked for ordinary designs with run-of-the-mill, unexciting, in fact, boring features.

Relevance

The patent process, both in German and English, was an interesting intellectual exercise. Bringing the idea to market, always a medium to long-term process, never appeared attractive enough to warrant my full attention compared to other opportunities. In strategy formation the intellectual and the business challenge can easily overlap. One needs to be clear on the distinction.

Lesson learned

You have a long-shot opportunity. Micro-managing it does not make sense. Neither does completely hands-off "fire and forget, management anarchy." Think hard about how best to achieve a happy medium, for instance, through delegation,